Bankruptcy, more layoffs in Linux world

Two more Linux companies are taking drastic measures to cope with financial problems.

Lineo is ridding itself of more than half of its work force, and Ebiz Enterprises has filed for bankruptcy protection.

Lineo, which hopes to embed the Linux operating system into set-top boxes and network routers, is laying off 60 employees and losing another 100 employees to projects the company hopes to spin off. The moves will leave the company with about 110 employees working on core projects: the Embedix and RTXC operating systems and programming tools to build computing systems using them, Chief Executive Bryan Sparks said in a statement.

Lineo had hoped for an initial public offering but cancelled its plans at the start of the year. In August, the Lindon, Utah-based company secured $20 million in funding to continue its effort to compete with better-established embedded operating system companies such as Wind River Systems.

Survival has been a dominant theme among Linux companies this year. Linux, a 10-year-old clone of the Unix operating system that's available for free or at a low cost, has provided serious competition to Microsoft Windows and various versions of Unix.

Partly due to the acceptance of the open-source OS by mainstream businesses, a host of companies emerged in the late 1990s to capitalize on its popularity. Despite a flurry of hot IPOs, most Linux companies have found profits and even bridge financing difficult to obtain. Many companies have been forced to lay off employees or drastically change strategies.

Ebiz, a Scottsdale, Ariz.-based company that sells Linux software and hardware, is in dire straits because it has been unable to find financing. The company, along with its Unix and Linux subsidiary, Jones Business Systems, filed for Chapter 11 bankruptcy protection on Friday, CEO Dave Shaw said.

"Our plan is to reorganize, not liquidate," Shaw said in a letter to shareholders. "A reorganization plan gives us an opportunity to rearrange our financial obligations so that the business may continue and perhaps flourish in the future and we can continue to provide ongoing service and support."

The company's stock currently trades over the counter at 2 cents per share. Some employees have been laid off, Shaw said.

"The economic and investment climate in the first half of the year has not allowed us to secure the funding we need to execute our 2001 business plan," Shaw said. "Over the last many months we have attempted several different 'Band-Aid' fixes as we looked for a permanent financing plan. However, with the overall downturn in the market and in particular, technology stocks, a functional and comprehensive financing plan was just not available."